Our plan to address the climate crisis
Sustainability is at the core of our culture and how we run our business. We approach sustainability from first principles. We are sustainable investors because we are convinced it is the right thing to do.
The climate crisis is the most fundamental challenge the global economy faces. The climate crisis refers to global warming and the resulting increase in weather events and other related environmental impacts caused by the emissions of greenhouse gases.
Despite recent momentum, government action to tackle the climate crisis has so far been highly insufficient. Climate change is now a widely established and socialised concept within financial markets – both as a financial risk, due to transition risks (changes in policies), climate-related physical risks (impacts on specific locations) and systemic risks (impacts on the broader economy and financial markets); and an investment imperative, because the way in which we direct capital will support (or hinder) meeting climate targets.
Here we set out our approach
We support the Paris Climate Agreement of limiting global warming to +1.5°C versus preindustrial levels. We do this by committing our investment portfolios to support the transition to net zero carbon emissions by 2050.
We support global emissions reduction of 50% by 2030, with baseline year 2019. This informs our asset-class decarbonisation targets.
We support the concept of ‘fair share’ decarbonisation targets. In other words, countries with historically higher emissions (which tend to be developed markets) should decarbonise more rapidly than countries with historically lower emissions (which tend to be emerging markets).
This is our default position – in our fiduciary management, our advice and our liability driven investments.
We support the Paris Climate Agreement of limiting global warming to +1.5°C versus preindustrial levels. We do this by committing our investment portfolios to support the transition to net zero carbon emissions by 2050.
We support global emissions reduction of 50% by 2030, with baseline year 2019. This informs our asset-class decarbonisation targets.
We support the concept of ‘fair share’ decarbonisation targets. In other words, countries with historically higher emissions (which tend to be developed markets) should decarbonise more rapidly than countries with historically lower emissions (which tend to be emerging markets).
This is our default position – in our fiduciary management, our advice and our liability driven investments.
We are measuring our investments’ carbon footprint, its current greenhouse gas emissions, and its contribution to climate change. We use and are reliant on data from MSCI, other data providers and the asset managers we deal with. Much of this data still requires to emissions to be estimated.
We do this to measure:
• Our financial risks, including transition risks, physical risks and environmental opportunities.
• Our real-world impact, to align our capital allocation and engagement with our commitment of limiting global warming to 1.5°C.
We measure our portfolio financed emissions per pound invested, based on enterprise value including cash (EVIC). This is the primary metric that we will use to measure our portfolios carbon footprint over time. We also support the use of alignment metrics to measure the forward looking alignment of investments towards net zero. In particular we measure the proportion of investments with a science based net zero target.
Climate justice is critical to the success of the Paris climate agreement. For government bonds, we favour CO2e per capita for carbon foot-printing. In addition, we look at historical emissions, ‘fair share’ carbon budgets, and how emissions will evolve over time.
We are measuring our investments’ carbon footprint, its current greenhouse gas emissions, and its contribution to climate change. We use and are reliant on data from MSCI, other data providers and the asset managers we deal with. Much of this data still requires to emissions to be estimated.
We do this to measure:
• Our financial risks, including transition risks, physical risks and environmental opportunities.
• Our real-world impact, to align our capital allocation and engagement with our commitment of limiting global warming to 1.5°C.
We measure our portfolio financed emissions per pound invested, based on enterprise value including cash (EVIC). This is the primary metric that we will use to measure our portfolios carbon footprint over time. We also support the use of alignment metrics to measure the forward looking alignment of investments towards net zero. In particular we measure the proportion of investments with a science based net zero target.
Climate justice is critical to the success of the Paris climate agreement. For government bonds, we favour CO2e per capita for carbon foot-printing. In addition, we look at historical emissions, ‘fair share’ carbon budgets, and how emissions will evolve over time.
We integrate sustainability – and climate change in particular – in our investment where practical and impactful.
When we invest in green bonds we assess both the sustainability of the issuer and the issue. Green bonds can support companies in less sustainable sectors achieve their transition, for example, a cement company that is looking to finance activities that decrease the carbon emissions of production.
We integrate sustainability – and climate change in particular – in our investment where practical and impactful.
When we invest in green bonds we assess both the sustainability of the issuer and the issue. Green bonds can support companies in less sustainable sectors achieve their transition, for example, a cement company that is looking to finance activities that decrease the carbon emissions of production.
We offer a globally diversified enhanced index Transition strategy for our fiduciary clients. This strategy excludes companies that are harmful to, or unwilling to contribute to, the transition to a sustainable society. It invests in those copmanies in the index that, based on our assessments, are able to contribute to the transition either because they are adapting (reducing negative harms), sustainable or positive impact.
The portfolio aims to support the transition to a sustainable society including decarbonisation inline with Net Zero objectives, and a robust approach to stewardship and engagement with the companies included in the portfolio.
Our preference is to engage (and change behaviour) rather than divest. That said, in the same manner that some investments are judged to be too risky irrespective of returns, some investments will be judged to have too negative a real-world impact, in particular, with regard to systemic issues, such as climate change or respect for human rights. When engagement is unsuccessful we will use a range of tools to escalate including voting against management or directors, supporting or co-filing shareholder resultions and ultimately disinvestment.
For third party managers we emphasise consistency between their stewardship engagement, voting, escalation and portfolio activities.
We believe scenario analysis helps inform our investment decisions. However many current quantitative models we believe under-estimate the systemic and physical risks of climate change. As a result we are adopting a qualitative narrative approach to climate scenario analysis that we believe is more decision useful for our clients.
Our three chosen climate scenarios are:
A 1.5°C degrees Paris-aligned transition – this is our goal, which directs how we will engage with investments. This scenario assumes that policy makers implement measures that will keep the rise in temperature limited to 1.5 degrees.
A 2°C degrees late transition (or, ‘inevitable policy response’) – this is our forecast of what we think is most likely to happen given the slow but accelerating pace of changes to public policy on climate change.
A 3°C slow transition – this is the risky scenario which we could face if public policy responses are too slow and tipping points accelerate climate change.
Where we invest directly in securities across the Cardano group, we apply our own stewardship and voting policies which seek to engage with issuers and address systemic risks such as climate change. We have high expectations of third party managers’ stewardship activities, including engagement and voting consistent with the Paris climate agreement.
We favour engagement that is long-term, collaborative, and prioritises real-world impact, such as reduction in absolute carbon emissions.
We are signatories to the UK stewardship code and Climate Action 100+.
We see policy engagement as a natural extension of our net zero commitment. We recognise the need to improve the sustainability of the market as-a-whole and that there are clear benefits to us and our clients through well-designed and implemented sustainable investment policy reform.
In particular, we will respond to policy consultations relevant to sustainable investment in the UK, Netherlands and Europe, and we will offer our expertise and experience where it is appropriate to do so.
Where we invest directly in securities across the Cardano group, we apply our own stewardship and voting policies which seek to engage with issuers and address systemic risks such as climate change. We have high expectations of third party managers’ stewardship activities, including engagement and voting consistent with the Paris climate agreement.
We favour engagement that is long-term, collaborative, and prioritises real-world impact, such as reduction in absolute carbon emissions.
We are signatories to the UK stewardship code and Climate Action 100+.
We see policy engagement as a natural extension of our net zero commitment. We recognise the need to improve the sustainability of the market as-a-whole and that there are clear benefits to us and our clients through well-designed and implemented sustainable investment policy reform.
In particular, we will respond to policy consultations relevant to sustainable investment in the UK, Netherlands and Europe, and we will offer our expertise and experience where it is appropriate to do so.
We see collaboration as part of the way we can contribute to a more sustainable financial system. By coalescing around common themes and methodologies, we send clear messages to the companies we own – and to our regulators. Collaboration allows for a faster, smoother transition.
We believe net zero is a collective action problem. While we can align our portfolios with net zero, ultimately we need to move the market as-a-whole to protect our beneficiaries from the environmental and financial consequences of climate change.
We believe the climate crisis is not properly priced in markets, which is why it warrants attention – or in other words, markets are financing investments that remain profitable in the short-term, but are inconsistent with long-term environmental and financial goals. In the long term we believe that the systemic financial risks posed by a failure to limit global warming to 1.5 degrees are substantial
We are members and supporters of a number of sustainability organisations, including PRI, IIGCC, PCAF and the Net Zero Asset Managers Initiative.
We see collaboration as part of the way we can contribute to a more sustainable financial system. By coalescing around common themes and methodologies, we send clear messages to the companies we own – and to our regulators. Collaboration allows for a faster, smoother transition.
We believe net zero is a collective action problem. While we can align our portfolios with net zero, ultimately we need to move the market as-a-whole to protect our beneficiaries from the environmental and financial consequences of climate change.
We believe the climate crisis is not properly priced in markets, which is why it warrants attention – or in other words, markets are financing investments that remain profitable in the short-term, but are inconsistent with long-term environmental and financial goals. In the long term we believe that the systemic financial risks posed by a failure to limit global warming to 1.5 degrees are substantial
We are members and supporters of a number of sustainability organisations, including PRI, IIGCC, PCAF and the Net Zero Asset Managers Initiative.
We seek to transition our operations
We measure and minimise our own firm’s carbon emissions, for example, we have green energy suppliers for both our Rotterdam and London offices and and we seek to minimise travel or take the train where possible. Where we do have operational emissions we will purchased voluntary carbon credits to offset our emissions. We do not usually make use of carbon offsets as a way to target net zero for our portfolio emissions.
On an annual basis we update our assessment of our own carbon footprint. Where we offset we aim to select projects that we have a connection with and believe offer sufficiently high quality carbon avoidance or sequestration.
We seek to transition our operations
We measure and minimise our own firm’s carbon emissions, for example, we have green energy suppliers for both our Rotterdam and London offices and and we seek to minimise travel or take the train where possible. Where we do have operational emissions we will purchased voluntary carbon credits to offset our emissions. We do not usually make use of carbon offsets as a way to target net zero for our portfolio emissions.
On an annual basis we update our assessment of our own carbon footprint. Where we offset we aim to select projects that we have a connection with and believe offer sufficiently high quality carbon avoidance or sequestration.
Sustainability – and climate change in particular – is a dynamic concept.
We are owner-managed, which gives us the freedom to try new things and to do things differently. We know the data is imperfect and the methodologies are still under development, particularly for hard-to-reach asset classes such as private equity, infrastructure or derivatives.
Our approach will evolve as our understanding of science, technology and corporate and investment practice evolves. We will update our net zero commitment periodically to ensure we’re at the forefront of addressing the climate crisis.
Sustainability – and climate change in particular – is a dynamic concept.
We are owner-managed, which gives us the freedom to try new things and to do things differently. We know the data is imperfect and the methodologies are still under development, particularly for hard-to-reach asset classes such as private equity, infrastructure or derivatives.
Our approach will evolve as our understanding of science, technology and corporate and investment practice evolves. We will update our net zero commitment periodically to ensure we’re at the forefront of addressing the climate crisis.
Progress on our climate commitments
Task Force on Climate-Related Financial Disclosures report for Cardano Risk Management Limited
This report outlines our approach to managing climate change risks and opportunities, and our Net Zero climate commitments. It is produced in line with the recommendations of the Task Force on Climate-related Financial Disclosures and in compliance with the regulatory requirements from the Financial Conduct Authority.
Progress on our climate commitments
Task Force on Climate-Related Financial Disclosures report for Cardano Risk Management Limited
This report outlines our approach to managing climate change risks and opportunities, and our Net Zero climate commitments. It is produced in line with the recommendations of the Task Force on Climate-related Financial Disclosures and in compliance with the regulatory requirements from the Financial Conduct Authority.
Net Zero Investment Consultants Initiative
Cardano is a founding signatory of the Net Zero Investment Consultants Initiative. Signatories to the initiative commit to nine principles around Net Zero. We are pleased to have published this report outlining our progress.
Net Zero Investment Consultants Initiative
Cardano is a founding signatory of the Net Zero Investment Consultants Initiative. Signatories to the initiative commit to nine principles around Net Zero. We are pleased to have published this report outlining our progress.
